June 26, 2017 | By:
President Trump is on the brink of striking at China’s behemoth steel industry through an obscure trade loophole in US law. But if he actually pulls it off, it will be US allies, not China, that will feel the brunt of it — and they could end up retaliating with harsh measures of their own, sending us down a path to global trade wars.
According to reports , we are just days away from finding out what the White House is planning to do as it concludes its investigation into whether steel imports into the US constitute a threat to national security, which was announced in late April.
The Trump administration is using a little-known provision in the Trade Expansion Act of 1962 to argue that if the US doesn’t have reliable access to materials required for national security, it has license to set up big trade barriers in order to boost domestic production of them. The White House is suggesting this could be the case for steel, a vital metal for defense technology.
Right now, the two main options the administration is considering are across-the-board tariffs that would tax all steel coming into the US at prohibitively high rates, and quotas that would allow at least some steel to be imported from countries each year until they cross a certain threshold, after which tariffs are induced.
he Trump administration argues that this would be a boon to American steelworkers and a serious blow to China. After all, the US is the world’s largest importer of steel, and China is the world’s largest producer of it. Creating obstacles for steel imports should give Americans steel jobs and bring China’s steel production — which violates global trade rules in the way it is made and sold, and has flooded global markets — to heel.
But in fact, the prospect of punitive American tariffs is worrying a whole bunch of countries that aren’t China — including some of America’s closest allies. To get a sense of why, take a look at the chart below, which shows where the US gets most of its steel from. If you’re thinking you’ve missed the word “China” on that chart, you haven’t: China doesn’t even make it into the top 10 sources of steel for the US today.
That’s because the US already subjects Chinese steel to a variety of penalties for violating trade rules, and those have slowed Chinese steel imports to a trickle. Today, the US gets huge amounts of its steel from countries it considers close allies and trading partners, like Canada, South Korea, and Mexico. And those are the main countries that would be hit by tariffs or quotas.